The Light Is Green: India auto industry update (Part 2): GM in India

As a provider of dealer management systems to vehicle dealerships in several emerging markets, we closely follow what is happening in the auto industry in key regions around the world. I thought it might be interesting to share some of that information.

In Part 1 of this series of posts about the promising future of the automotive industry in India, both as a consumer market and as a manufacturing hub, we talked about the great demand that is expected in that market over the next five years, mainly due to the huge and growing middle class, and their ultra-low vehicle per capita ratio of 7 per thousand (the US's is 450).

As a result, all of the major manufacturers have plans in motion, either through the installation of new plants, or via joint ventures with existing Indian automakers. Let's take a look at what each major is doing in India.

GM in India GM India

There's a handful of very important GM goings on in India. They just launched the Spark mini-car. They're expanding capacity at their existing plant, plus building a new one. And they have formally announced plans to heavily source components from India.

General Motors saw its sales decline by 25% in 2005 when they stopped selling the Adam Opel AG range of cars. They then introduced the Chevrolet Aveo sedan as a replacement for the Opel Corsa sedan. But now they are addressing the most important car segment in India with the...

Chevrolet Spark

GM recently made a big splash when they launched their eagerly anticipated Chevrolet Spark, a low-cost, low-maintenance mini-car. They had announced the Spark back in May 2006. This is their entry into the mini-car segment in India and they hope to soon be number one. The Spark is GM's most successful model globally.

The Chevrolet Spark will cost between $8,000 and 10,000 dollars, putting it a little on the high side of the mini-car spectrum that is currently owned by the Maruti 800, a model that ranks well in reliability, customer satisfaction and mileage. Other strong models in this segment are the Maruti Suzuki Zen and WagonR, and the Hyundai Santro.

The Spark will have a small, very fuel-efficient 1 liter gas engine, and not many features, as you'd expect from a car in this lower-end segment. The Spark has its own website (nice though annoyingly noisy).

Investments in plants

To increase production, GM recently ramped up capacity at their Halol plant by almost 50%, from 60,000 to 85,000 units per year. However, GM will initially produce only 2,000 Sparks a month. It looks like they want to sort of test the waters by introducing the car only in the northern and western part of India, and then proceed accordingly.

GM just began construction of their second Indian plant, in the city of Talegaon, near Pune, at a cost of $300 million dollars. Production of the Spark will shift to this location in the first quarter of 2008. GM will also use the plant to build small cars for other markets.

GM will also be investing in a new power train plant (diesel and petrol engines).

GM models in India

With the Spark, GM now offers seven models in India. The other six are the Optra (their top-seller), Aveo, Tavera, SRV, Aveo U-VA and the Forester (which looks to now have been discontinued).

GM will also soon release these models in India:

A diesel version of the Optra.
Epica. A midsize car that will compete with the Honda Accord and Hyundai Sonata.
Captiva. An SUV that will compete with the Honda CR-V and Hyundai Tucson.

GM's Nick Reilly, President of their Asia Pacific division, says that GM is looking for a 10% share of the Indian market by 2010.

Sourcing of components

And finally, Rick Wagoner, CEO of General Motors, recently announced that GM will source components from India worth around $1 billion annually over the next 4-5 years. To this effect, Mr. Wagoner said:

"We are focusing on leveraging the emerging high quality, low-cost supply base in India. We are not only increasing our local sourcing for local usage but also looking to source more auto components out of India for our global operations."

Posts in this series: